Pakistan-Terrible past, awfull present, potentially a great future
Pakistan is a poor impoverished country mired in debt and poverty. A country that in economic and social development takes two steps forward and three steps backwards. This not need be so, let me explain.
South Korea in the 1950’s was like Pakistan is today. It was partitioned North and South, thousands of people killed and displaced. A feudal society poor and rural, with limited amount of exports of fish, tungsten and a few primary goods. It received USAID (food aid).A US report described it as a bottomless pit. Corruption at every level of Korean society, most people lacked basic sanitation; few had access to clean running water, gas, telephone or electricity. Poor infrastructure, most of the population illiterate, no foreign direct investment (fdi).Korea was regarded as a basket case.
Within 40 years it has transformed itself into a modern industrial society to rival the West and its closest competitor Japan. How have they done this let me explain the hidden history of the Korean success story?

FEUDALISM
After partition the nationalist Generals took over the country (Democracy came much later), got rid of feudalism, substantial land reforms, a more equitable distribution of land among the population. India also got rid of the feudal landlords after independence. Land should be treated as national asset, like oil or mineral wealth. People should have right to property but not absolute property rights.
INDUSTRIAL POLICY
Korea invested in select industries which were told to become export led, so that Korea would have access to foreign exchange to buy imports of vital machinery for industrial imputs.FDI was welcome in select industrial sectors which Korea wanted to develop as a part of a broad industrial policy
Industrial policy must be pragmatic, a mixture of Market incentives and state direction. Samsung a huge global electronics giant in 1938 exported fruit and vegetables, in the 1970’s it moved in to sugar refining and textiles, in 1974 it bought 50% stake in Korea semi conductor industry, with government help it was persuaded to enter the communication cables market. The government provided support by selective tariff’s to keep foreign competition out, and subsidies to nurture Samsung’s productive capacities and develop new products for home markets and exports. This strategy is known as the infant industry policy. All Western governments, Japan and now China is using this policy to protect and develop its industries, only reducing restrictions when its industries can compete with foreign competition.
The period of support should not be indefinite.Samsung was given about 10 years to become a viable industry. The Korean government was brutal in closing down,re-organizing or selling industries that did not perform.

EDUCATION
Pakistan invests too little in education. The private education system is more about making money than educating people for the needs of the national economy. Unless governments are willing to put serious money into educating boys and girls, social and economic development will be severely limited. Korea invested huge amounts of money in to mass education sometimes depriving other sectors of the economy. Once a person can read and write, the mind expands and future generations will never be illiterate or ignorant

TRUST
Pakistan is a low trust society. Trust is the glue that binds society together, selfish individualistic societies do not work, Nigeria and Pakistan being two. High trust societies like Norway, Japan are far wealthier because the cost of business is far lower. In Pakistan and Nigeria you need to go to considerable lengths to ensure you get paid for goods or services provided, sometimes resorting to force as the legal system is corrupt and ineffective. Trust and prosperity go together. Trust is very hard to build in a society but not impossible.Korea managed it, education is one key element and use of force. Korea use to have the death penalty for anyone exporting capital (money)

CORRUPTION
Corruption is an alternative form of government, when civilian government does not work as in Pakistan people have no choice but to pay bribes or resort to corruption to get things done.
Korea built strong public institutions and a workable legal system. Being a nationalistic military dictatorship it ensured compliance through the fear factor. The police and Judiciary in Pakistan will very corrupt and does not work, this needs a major work,i do not have a complete answer to how you can make a legal system honest, may be better pay, better training, better recruitment?
Building strong public institutions and civil servants who believe in the concept of public service, can be done,education,getting rid of feudalism (setting people free from debt bondage),an industrial policy linking the public and private sector towards a common purpose (bringing prosperity to all Pakistani’s not just a few).Korea managed to do all these things successfully. Once people realise that their best interests are best served by co-operating with others and public and private institutions that actually work behaviour automatically changes, it’s all a matter of incentives, aligning a person’s selfish interests with that of the community.
Rise of the middle class
A rising expanding middle class is essential for Pakistan’s future prosperity and democracy. As Korea industrialized it created jobs needing higher education and training, investments in education by the government and training by industry public/private partnership ensured cost of training and education shared. A middle class is the future consumer class which drives the expansion of the economy
Many educated Pakistani’s have left because there is no substantial industry or commerce that needs their skills.Markets do not simply exist, states can create markets as well as regulate markets and private property rights.
This links with a industrial policy, creation of markets, strong public/private instituitions,trust,.The middle class must not be allowed to become parasitic, there must be upward mobility for people from poor background

The Role of Money
There is no shortage of money in Pakistan, the people who don’t need it have too much and the people who need it have too little. You cannot make the poor rich by making the rich poor. Much of the money of the rich is abroad. Civilian government officials loot the money that rightfully belongs to the people. I have a relative in high office that set up many enterprises by profiting from his position. This systematic looting of the countries resources is bleeding the country dry, what is to be done. Korea until recently had the death penalty for anyone exporting capital. Since this is not going to work because of the corrupt legal system I recommend exchange controls, to stop speculative funds going into short term investment like property and land speculation. Foreign direct investment should remain in the country for at least one year. Capital controls must exist, to ensure as much of the money circulates within the national economy.
Money sent by family members working abroad helps raise living standards, but does not create income generating business. It also makes people in Pakistan welfare dependent. The money sent ads to the gdp of the country rather than being generated from productive activity within the country. It does not replace the skills lost. It also distorts the local economy as the money goes into land and property speculation which prices the locals out unable to afford homes or start businesses .The Philippines health service has collapsed because so many of its medical staff working abroad, also they no longer train doctors or nurses as they go abroad after training

Korea and China has been able to retain its professionals by giving them incentives to stay, by working for the government or in private practice. To encourage skilled workers back there must be industry that needs their skills. China and Korea have carefully directed foreign direct investment and local investment into select industry which they want to develop through tax free export trading zones. Karachi can become an export free trading zone, attract manufacturing, low rent and no tax for industry located their, on the condition they use local labour including training. Clustering of business creates competition and drives innovation; it encourages local business to improve their standards. Nestlé provides clean bottles water and milk, people trust it to provide healthy products while local business is not trusted to adhere to high hygienic standards, if local business wants to survive it must provide high standards for its products it sells, which is happening slowly.
Pakistan’s stock market is too small and subject to insider dealing and corruption. The recent rise in petrol where supplies were held back, so that the price will rise even higher, means the stock market is not working efficiently.
I suggest pooling of private capital should go to local enterprises to create long term sustainable businesses. Pakistan has too many crooked businessman.
India and Korea by pooling capital has created national champions like Tata and Samsung. Pakistan has no such national industrial giants, because too many people are investing their money in get rich quick schemes, scam businesses to disposes people of their wealth.
The central bank should get rid of fractional banking and all banks can only lend money which they get from their deposits or limit fractional banking to 1:7 and fund local business

Taxation
Labour should not be taxed. Combination of land and property taxes and a wealth tax should be introduced. Property taxes are the best tax’s as they are difficult to avoid, with a wealth tax assets such as cars houses business and bank accounts are difficult to hide.Pakistans low tax receipts shows how difficult it is to collect income tax. There can be no public provisions like schools, roads, hospitals, welfare system, unless there are taxes, and there can be no government without tax. Korea collects in excess of 35% of gdp in taxes, in Europe tax can be between 35% to 70%
Land value tax is complicated issue and I cannot go into details. It works in Hong Kong, Tawain, and in Australia. All land must be taken into common ownership. People will still own their properties and have right to property and land, but not absolute property rights. People’s property rights and security will be protected. Gains in property property value other than structural improvements will be taxed at 80%,this money will, be used to fund public provisons.This will get rid of land speculation. IF people try to undervalue their land or property to avoid the land value tax, the state can buy it of them, from a sovereign Wealth fund created for this purpose. A land registry will list all land and property and occupants. Transfer of property will only take place when tax due has been paid.un-earned income should always be taxed away.
Since labour will be tax free people will be encouraged to work harder and be more productive, a real market economy can develop.

Capitalist system versus Market system
Money should always be related to goods and services people need, money should circulate the economy like oil in a car engines it should lubricate all parts of the economy. Financial centres like wall st and London are gambling centres and used for money laundering.
Hot money from these centres can destabilize small countries like Pakistan.Hot money poured into land and property speculation has left, Japan stagnant, USA, Dubai, Ireland, and Spain bankrupt.
To avoid such troubles central bank must control the money supply and control foreign direct investment and foreign exchange since Pakistan gets little international investment, this should not be problem.
People confuse money making from wealth creation, someone opening a shop creates wealth and some profiteering from rise in property makes money but creates no wealth, and we must encourage wealth creation and deter money making activities.

Trade and Globalization and investment
International trade is not God given; a country must only trade if it’s in its best interest. Ignore the advice of the World Bank and IMF.Pakistan’s comparative advantage is agriculture, by investing in sustainable productive agriculture, exporting surplus, this provides foreign exchange for buying imported machinery and releases people for work in industry as people migrate to cities. Globalization is a meaningless concept and has little relevance to Pakistan's development.
Most trade is done by neighbouring countries,Pakistan must seek out these markets for its produce to Iran,China,India,Oman,Saudia Arabia,Afganistan,krygystan,Qatar,UAE
China has little arable land in future it will import huge amounts of food. By investing in agriculture, producing good quality food, standardising production, Pakistan can gain advantage in these growing markets.
Again this links with good infrastructure, roads, internet, telecoms, utilities like electricity, water. These facilities do not to be high tech as long as they work for the benefit of the public.

Population control
Pakistan's population is out of control about to reach 200 million soon. The best way to control population is prosperity to the people. As people become educated and richer the birth rate declines. Failing these educating women has the same effect.

Politics and economics
Ultimate Political and economic should be local. Local politicians should reflect the concerns of local people and local business should investment in the local community. This should not be seen as a means of creating local dynasties to enrich oneself
Taxation should also be local and law making must be localized to reflect local peoples concerns. A federal system of this type would encourage competition between provinces, to better development. The National Government only intervenes when local politicians exceed their powers or do not serve the needs of local people
The role of the army in Pakistan's political and economic cannot be ignored. It is the only stable workable institution. The fauji foundation is worth billions for the benefit of the forces and own many large businesses in Pakistan
The UK, China, USA are all military industrial capitalist states. They put billions into research and development through private firms linked to the military, from this investment has come the internet and computer chip
Since the military are going to resist any attempts to reduce its budget, then public investment should bring some civilian benefits. If Pakistan can build nuclear weapons, this technology should be transferable to civiL projects
The army should bid for infrastructure projects, like roads, bridges. China uses its army for many civilian projects
A two year compulsory military service made compulsory, the wealthy can pay the military so their children from doing military service. Youth from poor background, will be taught to read and write, discipline, learn basic skills like driving a vehicle, electrical work, repair vehicles, paint, build walls .Doing military service will help the family as the they will be paid while doing military service. It will stop the poor children going to religious madras’s and being brain washed into becoming terrorists
Natural resources
Natural resources like coal, gas, mineral wealth, can be used within the economy or sold to get foreign exchange to pay for imports. I would recommend using independent experts to value any natural resources, and cost of extraction, then do a deal with China or Korea where they will build schools,hospitals,roads,electricity generation facilties,sewerage facilities, houses etc for the value of the resource.
This has two advantages, (1) no money will exchange hands, less chance of corruption, (2) the infrastructure will be built properly, according to plans using good materials. It will enable the state to build up national assets from which it gain economic benefits for the people.

Summary
My aim in this article is to take all the disadvantages Pakistan has and turn them into virtues. These are very brief ideas and I have left out many ideas’ and details. Below is list of reading material if you want to explore further my ideas and where they come from. Pakistan’s economy should be balanced, between agriculture, industry, service sector and a financial center.Pakistan is going through a haphazard development, this process should be orderly and accelerated.

Books
The role of money
The grip of death: debt and slavery: Michael rowbotham

The master returns.j.m Keynes: sk.skedelsky
Good bye America and the dollar empire: Michael rowbotham

Frozen desire the real meaning of money: James Buchan

Taxation
The silver bullet Fred Harrison
Progress as poverty Henry George
Capitalism v market system

Economics and the public purpose jk Galbraith
The future of money Bernard laitier
When corporation rule the world David korton
Politics and economics
Agenda for a new economy David korton

Globalization, economic development and the role
Of the state ha joon chang
Economics and the public purpose jk Galbraith
Feudalism
Silver bullet Fred Harrison

Industrial policy
Bad Samaritans ha joon chang
Globalization, economic development and the role of the state
Ha joon chang
Nation building Francis Fukuyama
When corporations rule the world David Korton
Education
Age of access Jeremy Rifkin
Trust
Trust and global prosperity Francis Fukuyama
Corruption
Trust and global prosperity Francis Fukuyama
Nation building Francis Fukuyama
Rise of the middle class
The affluent society jk Galbraith
Culture of contentment jk Galbraith
Culture matters edited by S.P.Huntington
Trust and global prosperity Francis Fukuyama

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